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Press review: How hard has Russian GDP been hit and Kiev still seeking NATO, EU membership

Top stories in the Russian press on Thursday, May 28


Izvestia: Russia could face 7.5% GDP drop following pandemic

Russia’s Ministry of Economic Development does not rule out a 7.5% decline in GDP for 2020 in the conservative version of its updated forecast for 2020-2023, a source close to the government told Izvestia. Under this scenario, the ministry forecasts an average annual price of Urals crude oil at $30.2 per barrel. The exchange rate under these conditions will be 72.9 rubles per dollar, and inflation here is expected to be at 3.8%. According to the source, the ministry has not presented an optimistic scenario to the government at all.

The fundamental difference between the conservative outlook and the basic one is only in the pace of economic development: the basic scenario foresees a decline of 5%.

The figures from the Economic Development Ministry’s conservative forecast are absolutely adequate, Deputy Director of ACRA sovereign rating and macroeconomic analysis group Dmitry Kulikov told Izvestia. However, in his opinion, there are no reasons for pessimism so far. Russia’s business activity indicators in April are generally on par with other countries.

The ministry’s conservative forecast will materialize if the second wave of the pandemic begins in autumn, Chief Economist of BCS Financial Group Vladimir Tikhonov believes. The US trade war with China, which was the main threat to economic stability before the spread of the coronavirus, also carries great risks, the expert added.

One way or another, the goal of government forecasting is not to predict the economic situation most accurately, but to include the most negative scenario in the budget in order to avoid a deficit, Tikhonov noted. Therefore, it is not surprising that the conservative scenario is not fundamentally different from the basic one, which in itself is moderately pessimistic, the expert explained.


Kommersant: Ukraine pursuing integration with EU and NATO

Joining NATO and the European Union remains Kiev’s strategic goal, according to Ukraine’s new one-year Euro-Atlantic integration program, signed by President Vladimir Zelensky. A source familiar with the situation told Kommersant, that in a year, Zelensky "got rid of illusions about Moscow’s readiness for peace" and aims to fulfill the agreed upon plans. Meanwhile, Ukraine might face serious obstacles to its integration plans.

A source, close to the Ukrainian president’s office told Kommersant that Zelensky and his team are really setting their sights on full cooperation with NATO and the EU, and not just prolonging the joint program. "There is no alternative. Partners from the West, or invaders from the East - 2014 has perfectly demonstrated this. In just one year on the job, Zelensky shed any illusions about Moscow’s readiness for peace and, I think, realized that only full membership in NATO would be a guarantee for no new ‘referendums’ under the supervision of soldiers without identification with machine guns bought in stores," the source told Kommersant.

NATO itself regularly notes that Ukraine will certainly become a member of the alliance, but refuses to talk about any deadlines. Nonetheless, there are serious obstacles to Ukraine’s integration into the organization, Kommersant noted. Speaking last week at an online discussion at the Kiev Security Forum, former US Special Envoy for Ukraine Kurt Volker emphasized that NATO’s leadership does not intend to include states with unresolved territorial issues. Volker also called on NATO’s top brass to review the charter for the speedy inclusion of Ukraine and other post-Soviet states into the organization, in particular, so that the article about attacks on any NATO member country does not extend to already occupied territories.


Izvestia: US slaps sanctions on China, hitting scores of hi-tech firms

Less than six months have passed since the conclusion of the trade ceasefire between the United States and China, yet their economic relations have started to deteriorate again. Washington has imposed sanctions on scores of Chinese hi-tech companies and according to Izvestia, it is clear that the trade war has re-ignited. Nevertheless, the November presidential election might lead to an unlikely detente.

The US Department of Commerce has blacklisted 33 Chinese companies, and almost all of them specialize in computer technologies and software. These firms will have limited access to US technology and products, and American companies in turn will have to contact the Commerce Department for the right to interact with them. Earlier, the Trump administration also announced new sanctions against telecommunications corporation Huawei.

"In relations between the United States and China, politics is closely intertwined with the economy, and it is not always easy to understand what comes first," Izvestia wrote. China was outraged by the new sanctions and drew up their own blacklist for ‘unreliable’ US companies. However, Beijing is in no rush to utilize it, allowing itself some room for maneuvering in future negotiations. At the same time, counter-sanctions may follow soon, and such giants as Boeing, Apple, Cisco, and Qualcomm are going to be in the crosshairs.

Certain hopes for a long-term detente in "the Cold Trade War" are associated with November’s presidential election, Izvestia wrote. However, according to the newspaper, the events of last year, when representatives of almost the entire political spectrum in the US called for sanctions against China, show that this scenario is unlikely. Even if Joe Biden or any other Democrat politician decides to put the brakes on the confrontation with China, interest groups and voters hostile to globalization will not allow this calm to last long, the newspaper wrote.


Nezavisimaya Gazeta: Israel’s annexation move to put EU’s unity to the test

Several EU leaders penned letters to Israeli Prime Minister Benjamin Netanyahu expressing discontent towards his plans to expand the country’s boundaries into the West Bank’s Palestinian territories. According to Nezavisimaya Gazeta, despite this, there is no unity in the EU on this issue. A number of countries have taken a pro-Israeli position. Attempts by High Representative of the EU for Foreign Affairs and Security Policy Josep Borrell to unanimously condemn Israel’s actions by all EU countries have failed.

On July 1, Israel intends to declare part of the territories under the control of the Palestinian National Authority, its own. The alarm European leaders are experiencing is caused not only by the Islamic world’s negative reaction to the situation, but also by the fact that the Palestinian authorities intend to withdraw from the government in protest. Then, the implementation of humanitarian aid programs to the Palestinians carried out by the EU will be called into question.

However, the EU has not yet decided to turn up the pressure on Netanyahu so that his government abandons the looming West Bank plan. "Borrell’s attempts to unanimously condemn Israel’s actions by all EU countries have failed," Nezavisimaya Gazeta wrote.

"I believe that the EU leadership is generally not interested in having some sort of consolidated position on the issue of territorial changes in the Middle East. A single position is a single responsibility. Why should the EU take it upon itself?" Alexander Tevdoi-Burmuli, an associate professor at MGIMO University, told the newspaper. In his opinion, the four leaders who wrote to Netanyahu did not expect that they would succeed in changing his plans whatsoever. "Such letters are written for the domestic crowd. France, the UK, Spain, and Italy have large diasporas of immigrants from Muslim countries. There are certain pro-Palestinian sentiments. Therefore, their leaders decided to state their position on foreign policy issue that concerns some of their voters," the expert explained.


Nezavisimaya Gazeta: Consumer crisis hammers Russia harder than China or US

A study by Alfa Bank has revealed that the collapse of Russia’s retail sector turned out to be worse than predicted and even worse than the plunge in consumer demand in China or the United States. According to experts interviewed by Nezavisimaya Gazeta, even after the restrictions are lifted, Russians won’t have time to compensate for the spring collapse and at the end of the year, Russia’s retail trade turnover will not return to the levels that had existed before the pandemic.

In April, Russia’s retail trade turnover decreased by 23.4% in annual terms, which turned out to be worse than earlier expert forecasts. According to the Alfa Bank report, the steep decline in Russian retail may be due to the low prevalence of online commerce.

Experts interviewed by Nezavisimaya Gazeta noted that this year, retail trade and consumer consumption will not be able to return to pre-pandemic levels. "We expect that at the end of 2020, retail trade turnover may be reduced by 10%-15%," BCS Premier’s Anton Pokatovich said. In his opinion, pre-coronavirus levels might be reached in the second half or even at the end of 2021.

"Even after the lockdown is completely lifted, we should not expect a sharp increase in retail turnover, since the purchasing power of Russians is now extremely low, which is associated with a significant loss of income due to the transition to remote work in the best case, and in the worst case, with a full loss of income," said Alim Bishenov, a member of the General Council of Business Russia.



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